What is IPO in Share Market? Initial Public Offering Explained | Trade Brains скачать в хорошем качестве

What is IPO in Share Market? Initial Public Offering Explained | Trade Brains

In this video, we discussed what is an IPO or Initial Public Offering in the share market? Here, we also covered What does ‘Going public’ mean, why do companies conduct IPOs, why are the disadvantages of conducting IPOs, why are people excited about IPOs and Is it worth investing in IPOs? Please watch this video till the very end to get learn all about IPOs. Get details of all latest IPOs in Indian Share Market at IPO Outlook by Trade Brains: https://tradebrains.in/ipo/ Connect with Trade Brains: Blog: https://www.tradebrains.in/ Portal: https://portal.tradebrains.in Courses: https://tradebrainsacademy.com/ Facebook:   / tradebrainsofficial   Twitter:   / tradebrainsgrp   LinkedIn:   / 13380376   What is an Initial Public Offering (IPO)? When a privately held company offers its shares for the first time to the public, then it is called Initial public offering (IPO). It is a way for companies to enter the stock market. Until a company offers IPO, the public is not able to buy the company’s share. Before the IPO of a company, its shareholders include limited people like founders, co-founders, relatives, friends and initial investors (like an angel investor, venture capitalist etc). However, after the company offers its IPO, anyone (public, institutional investors, mutual funds etc) can buy the shares of the company. What does ‘Going public’ mean? Going public means that a ‘privately owned company’ is conducting an initial public offer (IPO) to the public in order to enter the stock market as a ‘public company’. In short, when a company is offering an IPO, it is said that the company is going public. Why do companies conduct IPOs? There can be a number of reasons why any company offer an IPO. Here are a few of the top ones: For a new project or expansion plan of the company To raise capital (financial benefit) For carrying out new research and development works To fund capital expenditures To pay off the existing debts or reduce the debt burden For a new acquisition To create public awareness of the company For the group of initial investors desiring to exit the company by selling their stakes to the public. In addition, IPOs generate lots of publicity for the company and hence helps in creating market exposure, indirect exposure, and brand equity. Why are people excited about IPOs? There are a few common reasons why people are excited about IPOs. They are: Under-pricing myth: When a company announces its IPO, it’s presumed that the offered price is less than its true value. People are excited about the fact that they are the first one to buy the stock and will be rewarded handsomely when the company’s true price will be realized by the market. However, it’s very rare that the owners will be willingly underpricing the shares. Herd-mentality: As everyone they know will be applying for the IPO, people do not want to be missed out. Overhype by media/ underwriters: Media gets a high advertisement fee for the promotion of the IPO. Moreover, IPOs are intentionally overhyped by the investment banker and the underwriters. They make sure that these IPO’s get enough attention as this is their job to promote and sell the shares. ‘The Next …’ strategy: People compare the upcoming IPO with the Winners in the same industry and conclude that it will perform the same. ‘The next Eicher motors’, ‘The next symphony’, ‘The next Infosys’ etc. This ‘Next’ philosophy makes a lot of people excited about the upcoming IPO. Is it worth investing in IPOs? A lot of investors have made huge wealth by investing in IPOs. Had you invested in ‘INFOSYS’ when it got listed, you might have been sitting at a huge pile of wealth today. Further, IPOs are never priced in the benefits of the public. In the case where few IPOs are fairly priced, it gets a lot of demand from the public during its offerings and gets over-subscribed. Moreover, it soon becomes over-priced once it starts trading in the market. A few IPOs might give you a good return in the 1-2 months of its listing as they are introduced in the bull market, however, in the long run, their performance is quite poor. If you are willing to invest in the long-term, then be cautious about investing in IPOs. Focus on the quality of the company, not the hype generated by media or underwriters. Nevertheless, you can always pick these companies from the secondary market once the hype is over and the price is attractive. There are over 5,000 companies listed in Indian stock market. It’s better if you pick a good one among them than picking the upcoming hyped (5,000+1)th company.